COLOMBO: A Chinese state-owned firm said on Monday it plans to take its investment in Sri Lanka to $2 billion by building a major logistics hub.

Sri Lanka is looking to kickstart its economic recovery after defaulting on its foreign debt last year, when shortages of essentials such as food, fuel and medicines sparked widespread anti-government protests.

The investment by the China Merchants Group in a large logistics complex at Colombo Port, with an estimated construction cost of $392 million, is the first major foreign investment in Sri Lanka since the default.

The logistics centre project will take CMG’s “accumulated investment in Sri Lanka to… over 2 billion US dollars, making it the largest foreign investment enterprise in the island”, the company said in a statement on Monday.

CMG will have a 70 percent stake in the company set up to build the logistics complex at Colombo, the only deep-sea port between Dubai and Singapore.

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Describing the project as South Asia’s largest logistics hub, CMG said it expects to complete it by the end of 2025.

CMG also manages the port complex at Hambantota on the southern tip of Sri Lanka.

That port was considered among the white-elephant projects launched by former president Mahinda Rajapaksa, who ruled the country for a decade until 2015.

Rajapaksa borrowed heavily from China for projects that many criticised as a debt trap that led to the worst economic crisis in Sri Lanka’s history.

Unable to repay a huge loan taken from China in 2017 to build Hambantota port, Sri Lanka handed it over to CMG for $1.12 billion on a 99-year lease.

China has loaned billions for projects in Asia, Africa and Europe under its gargantuan Belt and Road Initiative, which critics say is saddling nations with debt.

Neighbouring India as well as the United States have also expressed concern about China gaining a naval advantage in the Indian Ocean with its access to Sri Lanka’s ports.

Sri Lanka has insisted that its ports will not be used for any military purposes.